Delivering private finance in the Middle Eastsaudiarabia.doingbusinessguide.co.uk/media/1391467/... · 2018-09-19 · 2 I Mott MacDonald I Delivering private finance in the Middle

Delivering private finance in the Middle EastOur passion for solution based advice helps countries around the world unlock investment for innovative programmes that deliver on need and ambition. From social infrastructure to transportation and energy to water, we connect our experts in region and globally to bring you outcomes beyond the ordinary.

2 I Mott MacDonald I Delivering private finance in the Middle East

Mott MacDonald

Your winning team for the complete solutionLong before construction work begins, much needs to be done to agree the contractualmechanisms to fund the project.

As the world’s pre-eminent lenders’ technical advisor, we know a thing or two about unlocking the investment needed to get new projects off the ground. Last year alone we advised on more than 236 PPP/PFI projects in 39 countries, bringing public and private sector together to realise new assets.

Mott MacDonald has over 50 years’ experience working in the Middle East. With over 1500 staff in the region and offices in Abu Dhabi, Dubai, Bahrain, Oman and Qatar, we advise government ministries, private sector investors and construction contractors on infrastructure projects throughout the region.

The governments of the region recognise that continuing investment in economic and social infrastructure is critical to their economies and the wellbeing of their diverse and growing populations. With slowing growth and pressure on public finance, opportunities are increasing for local and international private sector sources of capital investment –and the PPP model is developing to accommodate them. New PPP laws and structures are being developed where they have not already been established, with distinct local characteristics.

The best designed assets bring economic benefits while having a positive social and environmental impact. Resilience is also important – in the event of unexpected social, economic, climatic or natural shocks, well-designed assets minimise the impact on service delivery. This is especially crucial in the emerging markets where much of the estimated US$5trn a year in infrastructure investment will be spent.

Clients recognise that there is an evolving best practice to consider sustainability and resilience of projects. But evidence is mounting that a deeper assessment will lead to direct and indirect financial returns. So we are using our experience in project finance to assess projects to provide a more holistic approach to asset design and funding.

With constant demands for better service, the pressures of urbanisation, and a growing world population, the need for good, sustainable infrastructure is more important than ever. Our project finance expertise helps to bring well-designed, sustainable projects to completion.

Public stakeholders and potential investors need a high level of assurance and guidance to give them confidence in the profiling and allocation of project risk.

Mott MacDonald understands these risks – we have the broadest knowledge and most detailed insight of the technical and commercial factors affecting every infrastructure sector.

No 1 in the global infrastructure finance market for the sixth time

Partnership Awards 2015Best Technical Advisor of the Year

IJGlobal Awards 2015Best Global Technical Advisor of the Year

P3 Awards 2014Best Technical Advisor

NCE/ACE Consultants of the Decade AwardsInternational Consultant of the Decade

Delivering private finance in the Middle East I Mott MacDonald I 3

• Market sounding• Portfolio optimisation• Secondary market transaction support

• Business change support• Service improvement and consultancy• Post-merger integration support

• Testing, certification and assurance• Operation monitoring and payment control• Condition survey

• Reviewable design data management• Engineering design services• Client representative

• Programme implementation• Contract and programme management• Quality reviews and audits

• Procurement and contractual advice and tender administration

• Facilities management and operational strategy and planning

• PPP capacity building and institutional support

• Technical and commercial due diligence and risk assessment

• Lifecycle review and modelling• Operational reviews (including variation/

change impact assessment)

• Full business case development, production and cost-benefit analysis

• Capex, Opex and lifecycle planning• Revenue and cost modelling

• Economic, environmental and social impact analysis• Procurement strategy• Project scoping and viability

• Market entry strategy• Competitive environment analysis• Acquisition target identification and evaluation

• Policy development• Feasibility development • Strategic and outline business case development

ServicesStrategic implementation

Strategic planning and development

Strategic and market analysis

Project inception

Feasibility studies

Business case

Transaction advisory

Project development and delivery

Procurement support

Programme management

Design

Project operation

Asset assurance and delivery

Business improvement

Acquisition/divestment


Transforming healthcare in Turkey with PPP

Turkey’s government has embarked on an ambitious PPP programme to provide 95,000 new hospital beds by 2023. Leading international financial institutions, financiers and commercial banks are providing the private investment, subject to the due diligence carried out by Mott MacDonald. PPP is new to Turkey for infrastructure, so the programme’s financial closure relied on our experts turning deep complexity into a major opportunity for the growing population of this fast-developing nation.

The hospitals in the pipeline will be some of the largest hospitals ever built. In particular, the Etlik and Bilkent Health Campuses will provide close to 4000 beds each, making them the largest in the programme.


OpportunityThe Turkish Ministry of Health is building some of the world’s largest hospitals to meet increasing healthcare demands as a result of a fast-growing population. The programme will renovate healthcare infrastructure throughout Turkey, bring together smaller hospitals under 38 integrated health campuses, and increase the quality and efficiency of the health service. Mott MacDonald won the lenders’ technical advisory (LTA) role on the first hospital PPP project, the Kayseri Integrated Health Campus (1583 beds) in 2011. In 2012, we were appointed as LTA on the second and third schemes, Ankara Etlik and Bilkent hospitals. During 2013 we won the same role on the Istanbul Ikitelli hospital project. On a number of projects our role expanded to cover environmental and social due diligence. We are now working on 18 different hospital and laboratory campuses under 12 different PPP schemes across Turkey.

SolutionThe key challenge of these projects was liaising with the Ministry of Health and sponsors in a country new to PPP projects, to arrive at a contractual agreement (in particular, the service specifications and payment mechanism) that was more in line with international PPP best practice for risk allocation, and therefore bankable for the international lenders.Our infrastructure finance and investment transaction and health specialists from the UK collaborated closely with our team on the ground in Istanbul and really went the extra mile to meet every client’s expectations for face-to-face support.We worked with the Ministry, sponsors and their advisors to develop a commercial solution where the risk profile would be acceptable to the lending community. We advised sponsors on the acceptability of their environmental and social due diligence, which was essential to meet the standards, public disclosure and consultation requirements of lenders such as the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD) and the Overseas Private Investment Corporation (OPIC).

Project Health PPP Turkey

Location Turkey

Client International lenders and development banks

Expertise Lenders’ technical advisory (LTA), providing due diligence

OutcomeMott MacDonald has been instrumental in assisting sponsors and the Ministry of Health to move forward towards a commercial solution that will meet the expectations of the international and Turkish lenders alike. To date, six of our twelve projects have successfully reached financial close. In 2015, building began on the Bilkent Integrated Healthcare Campus, the world’s largest greenfield healthcare scheme covering over 1.2M m2, providing 3804 beds and parking for 7209 vehicles. It will include over 100 operating theatres and is expected to treat around 35,000 patients per day and employ approximately 8000 staff. Early in 2016, the Etlik Integrated Healthcare Campus, also one of the world’s largest hospitals with 3577 beds across more than 1M m2, received the green light for construction to start. Keith Mitchell, Mott MacDonald’s project director, commented at the time: “The sheer scale of this project and tight deadlines to deliver the financing and achieve financial close was a test of our due diligence expertise. However we overcame these challenges through excellent collaboration between our PPP transaction advisory experts in the UK and Turkey, who will now go on to lead our construction monitoring activities.”

Winner of the British Expertise International Awards for Outstanding International Leadership Award 2015

Best Infrastructure Financing Award from among 100 candidates by the Bonds & Loans Turkey Awards 2015


OpportunityThe Kingdom of Bahrain is attempting to meet the housing demands of a rapidly growing national population. As part of the strategy the Ministry of Housing, in partnership with the SPV (Sharaka For Housing Projects BSC), is constructing 2817 social and affordable housing units and apartments, including all associated secondary and tertiary infrastructure and landscaping. The works are split over two sites. The Al Luwzi site comprises 832 social housing units and the Al Madina Al Shamaliya site comprises 1985 social and affordable housing units and apartments.The project has been designed and developed to create neighbourhoods with a strong sense of community that incorporate the cultural and social needs of Bahrainis. The intention is that this will be achieved by providing not only desirable dwelling units but also the right amount of well connected-designed community facilities and public open spaces.The PPP project has also been registered with the USGBC (United States Green Building Council) and application is being sought for LEED ND (Neighbourhood Development) Certification at Al Luwzi and LEED NC (New Construction) Certification at Al Madina Al Shamaliya.

2817Social and affordable housing units

Delivering Bahrain’s first affordable housing PPP


The Bahrain Affordable HousingPublic Private Partnership (PPP)project is the first of its kind in theGulf Region and is the biggestproject undertaken by the Kingdomof Bahrain’s Ministry of Housing.

Project Bahrain affordable housing PPP project

Location Al Madina Al Shamaliya and Al Luwzi, Bahrain

Client The Government of the Kingdom of Bahrain as represented by The Ministry of Housing

Expertise Client representative

SolutionWorking as client representative, for both schemes, wemanaged the contract, managed and supervised designand monitored construction. We also monitored andoversaw the defects liability and facilities managementphase. We drafted the RFP for the independent certifier.We provided advice and guidance on the suitabilityof the affordable housing sales agreement and alsoon the amendments to the concession agreement.We liaised with authorities and utilities providers onmultiple contracts. We provided guidance to the clientduring negotiations to resolve disputes with the SPV.

OutcomeThe project was awarded via a five year concession agreement under which the successful SPV is responsible for the design, construction, financing and operation of all 2817 units for a period of five years.Construction began in June 2014 and was completed at the end of September 2015. The overall end of the concession period is currently scheduled for mid-2019.


Project Madinah Airport

Location Saudi Arabia

Client TIBAH Consortium

Expertise Traffic and business plan advisory services

Advancing Saudi Arabia’s airport sectorOpportunityThe General Authority of Civil Aviation (GACA) of the Kingdom of Saudi Arabia has set a goal of reforming and liberalising the country’s airport sector. This initiative was focused around developing the airport sector on a commercial basis through the introduction of competition and increased private sector participation.To deliver this, GACA invited bidders to tender for the operation, maintenance, expansion, rehabilitation and modernisation of Madinah Airport within the structure of a long-term PPP. The traffic forecast for Madinah airport needed to reflect the additional dynamic of an airport receiving religious pilgrims who each year travel to the holy cities of Makkah and Madinah for the Hajj and to perform Umrah. These pilgrimages occur according to the Islamic Hijri calendar, but these timings vary year-on-year in relation to the Gregorian calendar, making the forecasting, business planning and operational management of the airport challenging. A critical part of this was assessing the split of this Hajj traffic between Jeddah and Madinah airports as both serve pilgrims to the holy cities.

SolutionWe spoke with airlines at their home bases and developed dedicated traffic forecasts covering the detailed religious programmes and movements over the forecast years, and benchmarked driven revenue and cost assumptions. Using this intelligence we then conducted full demand and peak hour projections so we could help efficiently size the new infrastructure – the airport requires substantial investment for the expansion and rehabilitation of the terminal buildings and associated infrastructure in order to improve service levels.

OutcomeWe helped our client, TIBAH Consortium, compile bid documents including bid strategy, aviation marketing development plans, operating plans and communications strategy. Our design data supported the consortium’s airport planners and architect by underpinning the capital development programme. Our thorough traffic and business plan advisory services contributed to the TIBAH Consortium being awarded the 25 year, US$1.5bn concession at the airport and continues our track record of advising the successful bidders in airport transactions round the world.

Winner of 2012 Middle East and Africa Infrastructure Deal of the Year (PFI Awards)

World Finance PPP Awards 2013Best Transportation Project


Project Jordan Solar One solar photovoltaic (PV) power plant

Location Al Mafraq, Jordan

Client International Finance Corporation (IFC)

Expertise Independent engineer/technical advisory services

Boosting renewable energy in Jordan

OpportunityJordan’s government is looking to increase renewable energy contribution to 10% of the country’s generation mix by 2020. The Jordan Solar One solar photovoltaic (PV) power plant has been proposed to support this aim. It will be located in Al Mafraq, 50km north of the Jordanian capital, Amman. All output generated by the project will be sold to Jordan’s National Electric Power Company (NEPCO) under a 20-year power purchase agreement (PPA). Our client IFC needed an experienced and reputable consultant to conduct a thorough study of the plant’s technical aspects to assess the project as a whole, identify any technical risks and produce a full energy yield estimation. This would enable the IFC to assess whether the project company has the capacity to service the proposed loan. The IFC also requested a detailed analysis of environmental, health, safety and security aspects to assess whether the project would comply with the environmental and social standards required in the area, including compliance with relevant international legislation.

SolutionWe carried out a full technical due diligence study of the project. Our review focused on assessing of three pivotal types of potential risks from a technical standpoint – development, construction and operational risks. We visited the site to assess its suitability for development of a solar PV project of this capacity from technical, environmental and social viewpoints, including shading and potential risks to energy generation and impact on local communities. Following successful financial close, our team is now visiting the project site on a quarterly basis to support the lenders in monitoring implementation in terms of schedule, budget compliance, quality of work, performance of the project participants and compliance with project agreements and environmental and social requirements.

OutcomeWe were able to offer holistic advice to the lenders by undertaking the complete lender’s technical advisor (LTA) role – technical, environmental and social review – all in-house, taking advantage of our extensive, international experience with solar PV projects. Construction of the project is now complete and, while the plant is yet to start exporting generation to the grid, its positive impacts are already being witnessed in Jordan. The project has brought extensive awareness of the benefits of sustainable solar energy in the region, and especially in a country currently highly dependent on imported oil and gas products.


First healthcare PPP in Egypt

OpportunityEgypt had a well-respected system of medical education, but had difficulty delivering high-quality medical care because of inadequate hospital facilities. The existing maternity hospital could not extend the full range of advanced services required in its current location, while the hospital facilities for neurology and other specialist services were being delivered in buildings that were over 80 years old and could not be safely adapted for the higher standards of patient care and advanced medical equipment now required.

SolutionTo address the issue, Egypt sought to develop its first PPP in the health sector to design, build and operate two new specialist teaching hospitals to be located at Alexandria University, a leader among Egypt’s educational and healthcare institutions. The scope of our role as technical advisor covered construction of:

• A new 200-bed gynaecology/obstetrics university hospital located as part of a new hospital complex which also includes a new paediatric and a new emergency hospital at the Smouha hospitals complex.

• A new blood bank at the Smouha hospitals complex.• A new 223-bed hospital near the existing Mowasat

Hospital to provide highly specialised care services (centres of excellence), a neuro-centre and a urology/nephrology (including kidney transplants) centre.

Initial capital expenditure for the two hospitals was planned at US$225M, including equipment.

We provided advisory services encompassing all aspects of facilities management, contracts, equipment and information management and technology for the development. This involved undertaking a review of existing arrangements, providing guidance on tender documentation and process, holding a training workshop for evaluators and being on hand to provide technical support during the evaluation process. Our team of facilities management, contract management, communications and technology professionals were supported by sub-contractors MTS, experts in healthcare equipment advisory services.


Project Alexandria University Hospitals PPP

Location Egypt

Client International Finance Corporation (IFC)

Expertise Lenders’ technical advisory services featuring facilities management, procurement and medical equipment

This PPP project was part of the Egyptian Government’s aim to strengthen its health infrastructure and was seen as a model for future hospitals.

OutcomeWe assisted the IFCthroughout the projectdevelopment to enable theconcession contracts tobe signed. An internationalconsortium led by BareeqCapital, an Egyptianprivate equity firm focusingon social infrastructureprojects, together withlocal and internationalpartners, G4S, Siemensand Detac, won the 20-year concession contracts.We subsequently acted aslenders’ technical advisorto InfraMed Infrastructure.


Project Kuwait Schools Development Programme

Location Kuwait

Client Kuwait Authority for Private Partnerships

Expertise Transaction advisory services

Creating the best space for learning in Kuwait

OpportunityThe State of Kuwait recognised the need to improve facilities management in schools and looked to international designers, contractors and facilities management service providers to help implement best international practice in the management of the school environment to provide the best opportunity and environment for learning. The State of Kuwait, through the Kuwait Authority for Partnership Projects, planned to develop nine new schools and an Olympic-size swimming pool as a public private partnership project. The project is a design, build, operate and maintain contract over 25 years. Investors will be responsible for the design and construction of each facility and the ongoing facilities management to specific performance criteria. The Ministry of Education in Kuwait shall be responsible for the delivery of the curriculum.

SolutionAs transaction advisor our role included preparing pre-feasibility and feasibility studies and contract documents including output specifications. We provided cost consultancy services and developed the payment mechanism as well as preparing the EOI, RFQ and RFP documents. Throughout the procurement of the project we gave technical support and evaluated submissions at each stage of the tender process.

Outcome The PPP is a pathfinder project for the state of Kuwait and includes use of performance based service specifications rather than the traditional input based contracts. The specifications we prepared looked to promote a whole-life perspective to the design, construction and facilities management of the asset so that a long-term sustainable solution can be delivered.


Project Shuaibah III Expansion 33MIGD seawater reverse osmosis project

Location ACWA Power (Shuaibah Expansion Project Company)

Client Jeddah, Saudi Arabia

Expertise Owner’s engineer

Fast-track solutions to meet Saudi Arabia’s water needs

OpportunityThe challenge was to provide an additional 150,000m³/day of desalinated water capacity within 20 months tomeet the accelerating demand in Jeddah. The projectwas co-located on reclaimed land adjacent to theShuaibah Independent Water & Power Production(IWPP), the first IWPP in Saudi Arabia, and both plantsuse a common water discharge channel. The facilityuses reverse osmosis (RO) technology in two passdesign and energy recovery equipment and systems.

SolutionAs owner’s engineer we reviewed detail designof the seawater reverse osmosis (SWRO) plantincluding remineralisation as per multistage flash (MSF) and requirement of a water purchase agreement(WPA). We commented on the design of thedebutant designer in SWRO technology and monitoredproject construction and co-ordination of sitesupervision. We reviewed and approved performancetest procedures for RO plant and other plant. Wereviewed acceptance test procedures in line with theWPA and reviewed energy demand model and plantbilling system software test procedures. The plantcomprises of seawater intake, one stage dual mediafiltration, cartridge filter, two pass RO modules andpotable water treatment system and producing a total150,000m³/day (33MIGD) of net potable water, interfacewith existing seawater outfall and potable water tank.

Currently the largest desalination plant in the world

1,030,000m³/day water production

OutcomeTogether, ShuaibahIWPP and Shuaibah IIIRO Expansion form thelargest desalination plantin the world, with capacityof 1,030,000m³/day waterproduction. This servesa critical role during theHoly Months of Ramadanand the Hajj period toensure continuous andreliable power and watersupply to the MakkahMukarramah region.


OpportunityConstraints on financial resources are forcing infrastructure owners and operators to look for alternative ways of paying for new assets. The rapid increase in the population of Amman placed increased pressure on wastewater infrastructure, one of the impacts of which was the discharge of untreated sewage into watercourses. At As Samra, massive overloading of ageing wastewater stabilisation ponds was creating a growing environmental nuisance as well as significantly reducing the potential for water reuse. Jordan’s Ministry of Water and Irrigation turned to the private sector for support and the delivery of a modern full scale wastewater treatment system. Affordability was a real issue so innovative financing was needed to realise the scheme.

Project As Samra wastewater treatment plant

Location Jordan

Client Arab Bank

Expertise Lenders’ technical advisory services

Modern infrastructure is more efficient and better for the environment but not within reach of every asset owner and operator. When a new wastewater treatment plant was needed to service Jordan’s growing capital city Amman, an innovative project finance model unlocked the investment required to get the project off the ground.


Affordable model brings environmental solution to Jordan

75%Energy recovery

40%Increased capacity

SolutionThe facility provides full wastewater treatment and biosolids management and achieves 75% energy recovery. It was constructed in two phases: the first phase (built 2003-08) with a throughput capacity of 260,000m³/day, which was expanded to 360,000m³/day on completion of the second phase (built 2012-15). Delivered through a design, build, finance and operate (DBFO) contract, the Samra Project Company will operate the facility for 20 years with full responsibility for whole-life costs, ensuring that asset management is prioritised. We provided technical and commercial due diligence to the lenders to achieve successful financial close of this complex project which involved viability gap funding provided through grants in Phase 1 from USAID and in Phase 2 from the Millennium Challenge Corporation through MCA Jordan. This was followed by construction phase assurance services and we were retained by the lenders to monitor the As Samra Project Company’s performance during the commercial operations phase.

OutcomePhase 2 of the project was completed on time through a commitment to quality management and a partnership approach to technical and commercial problem solving with the backing of a long-term operational contract. A holistic approach to asset management has ensured very high operational reliability. The project has delivered multiple environmental benefits by resolving odour nuisance and pollution at the treatment plant, tanker reception centre and satellite pumping stations. The power requirements of intensive wastewater treatment have been minimised by utilising hydropower turbines and generators running on gas recovered from treated biosolids. Treated water is being used by local farmers with the remainder being discharged into the Zarqa River for further re-use. A commitment to training has upskilled the local workforce and provides valuable job opportunities. This PPP model has attracted the interest of both local stakeholders and international funders as a template – in Jordan and around the world – for delivering similar infrastructure projects that lead to more efficient, more resilient utility services and a cleaner environment.


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Delivering private finance in the Middle Eastsaudiarabia.doingbusinessguide.co.uk/media/1391467/... · 2018-09-19 · 2 I Mott MacDonald I Delivering private finance in the Middle